R Bluefin Insurance Services Ltd v Financial Ombudsman Service Ltd Wayne Lochner (Interested Party)
| Jurisdiction | England & Wales |
| Judge | Mr Justice Wilkie |
| Judgment Date | 20 October 2014 |
| Neutral Citation | [2014] EWHC 3413 (Admin) |
| Docket Number | Case No: CO/10401/2013 |
| Court | Queen's Bench Division (Administrative Court) |
| Date | 20 October 2014 |
[2014] EWHC 3413 (Admin)
Mr. Justice Wilkie
Case No: CO/10401/2013
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Charles Béar QC and James McClelland (instructed by DAC Beachcroft LLP) for the Applicant
James Strachan QC (instructed by Financial Ombudsman Service) for the Defendant
Hearing date: 7 th October 2014
Introduction
The Claimant ("C") claims judicial review of a decision of one of the Defendant's ("FOS") ombudsmen, Ombudsman Derry Baxter, dated 3 rd May 2013 ("the Jurisdiction Decision"). By that decision, FOS decided that the Interested Party ("Mr Lochner") was eligible to bring a complaint ("the Complaint") to FOS against C.
C, trading as Laythorn Blackham Insurances Brokers Ltd, originally acted as a broker for a Directors and Officers Insurance Policy ("the D&O policy") taken out by Betbroker Ltd ("Betbroker"). C is authorised to provide insurance broking services under the Financial Services and Markets Act 2000 (" FSMA 2000") and is subject to the compulsory jurisdiction of the Defendant.
C acted for Betbroker in obtaining the D&O policy. Betbroker was the policyholder. Mr Lochner benefited from the policy as an "insured person" (as did his spouse).
As an "insured person", Mr Lochner complains that he notified C of a potential legal claim to be made against him alleging wrongful acts by him in his capacity as director of Betbroker. He claims that his liability in respect of such a claim should have been covered by way of indemnity under the D&O policy. Mr Lochner's complaint to FOS is that, he alleges, C failed to act on his notification to them of the potential claim by alerting the insurer to it. The insurer subsequently rejected cover for Mr Lochner as an insured person under the policy. The claim made against Mr Lochner has been compromised on terms which have resulted in a loss to Mr Lochner from which, he complains, he would have been protected by the policy but for C's failure to notify the insurer of his potential claim under the policy.
Thus, the act or omission about which Mr Lochner sought to complain to FOS was C's failure to act properly in its capacity as a broker when dealing with the notification of a claim by Mr Lochner as an "insured person".
C's judicial review challenge raises a single issue: did FOS err in law in finding that it had jurisdiction to entertain Mr Lochner's complaint? It would have had jurisdiction under the scheme if he was an "eligible complainant". The category of "eligible complainant", as defined by the rules, which FOS found that Mr Lochner satisfied, was that he was a "consumer". Under the rules, the term "consumer" is defined as "any natural person acting for purposes outside his trade, business, or profession". FOS concluded that he was. C contends that this is a question for the court to decide and that the FOS decision is wrong. Alternatively, C contends that FOS misdirected itself in concluding that Mr Lochner was a consumer for the purposes of his complaint and that its decision should be quashed on conventional Judicial Review grounds.
The Ombudsman has not decided the merits of the complaint, only that she considers Mr Lochner to be an eligible complainant.
The claim for Judicial Review was launched on 2 nd August 2013. Permission was refused on the papers by the Hon. Mrs Justice Lang DBE on 16th September 2013. She said:
"There is no arguable error of law in the decision made by the Defendant. The Defendant has correctly applied the relevant rules and guidance in concluding that the Interested Party is a 'consumer' and therefore eligible to bring a complaint."
On oral renewal, C argued that FOS had made two errors.
(1) in assessing whether Mr Lochner was a consumer at the time that the complaint was made. C alleged that the relevant time for assessment should have been the time of Mr Lochner's allegedly wrongful act or when the D&O Policy was taken out. C now argues that the status of Mr Lochner was to be determined, at the latest, at the time of the act or omission of which he complains i.e. when C failed to notify the insurers of the potential claim against him, and
(2) in concluding that, because Mr Lochner was not bringing his complaint on behalf of Betbroker he was, for that reason alone, acting as a consumer. C claims that FOS failed to grapple with whether Mr Lochner was acting outside the purposes of his own trade, business or profession by considering the context of his complaint. Had it done so, it would have been bound to conclude that he was not acting as a consumer at the material time.
Permission was granted by Blair J on 12 th February 2014, and the Judge directed that C's grounds of claim were to be taken from C's skeleton argument for the renewal hearing.
C has developed its challenge so as to give rise to the following sub-issues:
(1) Is the decision whether Mr Lochner was acting as a consumer a question of "precedent fact" for the Court to determine regardless of the FOS assessment?
(2) If the issue is for FOS, did the Ombudsman misdirect herself in law in reaching her decision?
(3) If the issue is for FOS and she directed herself correctly in law, is the Ombudsman's decision irrational in the Wednesbury sense?
The Legal Framework and FOS procedure
Section 225(1) of FSMA provides as follows:
"This part provides for a scheme under which certain disputes may be resolved quickly and with minimum formality by an independent person."
Section 226 provides (emphasis added):
"226. Compulsory jurisdiction
(1) A complaint which relates to an act or omission of a person ("the respondent") in carrying on an activity to which compulsory jurisdiction rules apply is to be dealt with under the ombudsman scheme if the conditions mentioned in subsection (2) are satisfied.
(2) The conditions are that—
(a) the complainant is eligible and wishes to have the complaint dealt with under the scheme;
(b) the respondent was an authorised person … at the time of the act or omission to which the complaint relates; and
(c) the act or omission to which the complaint relates occurred at a time when compulsory jurisdiction rules were in force in relation to the activity in question.
(3) " Compulsory jurisdiction rules" means rules—
(a) made by the FCA for the purposes of this section; and
(b) specifying the activities to which they apply….
(6) A complainant is eligible, in relation to the compulsory jurisdiction of the ombudsman scheme if he falls within a class of person specified in the rules as eligible.
(7) The rules—
(a) may include provision for persons other than individuals to be eligible; but
(b) may not provide for authorised persons to be eligible except in specified circumstances or in relation to complaints of a specified kind.
(8) The jurisdiction of the scheme which results from this section is referred to in this Act as the "compulsory jurisdiction".
Section 228 makes detailed provision for determination under the compulsory jurisdiction. That provision includes:
…
(2) A complaint is to be determined by reference to what is, in the opinion of the ombudsman, fair and reasonable in all the circumstances of the case.
Section 229 concerns awards under the compulsory jurisdiction. It includes:
…
(2) If a complaint which has been dealt with under the scheme is determined in favour of the complainant, the determination may include—
(a) an award against the respondent of such amount as the ombudsman considers fair compensation….
(b) a direction that the respondent take such steps in relation to the complainant as the ombudsman considers just and appropriate (whether or not a court could order those steps to be taken).
It is common ground that these provisions enable FOS to make decisions which do not necessarily reflect the strict legal position and that those powers reflect the objects of the scheme identified in section 225.
The relevant rules, which take effect as delegated legislation, are contained in the "Dispute Resolution: Complaints" section of the Financial Services Handbook ("the Handbook"), known as "DISP". The FCA is subject to detailed statutory provisions including obligations to consult before making any rules ( s138I of FSMA).
DISP 2.7.3R (the "R" denotes a rule, G denotes guidance) provides that:
"An eligible complainant must be a person that is:
i) a consumer
ii) a micro-enterprise;
a) in relation to a complaint relating wholly or partly to payment services, either at the time of the conclusion of the payment service contract or a the time the complainant refers the complaint to the respondent; or
b) otherwise, at the time the complainant refers the complaint to the respondent;
iii) a charity which has an annual income of less than £1 million at the time the complainant refers the complaint to the respondent; or
iv) a trustee of a trust which has a net asset value of less than £1 million at the time the complainant refers the complaint to the respondent."
The term "complaint" is defined in the Glossary to the FCA Handbook:
"any oral or written expression of dissatisfaction, whether justified or not, from, or on behalf of, a person about the provision of, or failure to provide, a financial service or a redress determination which:
(a) alleges that the complainant has suffered (or may suffer) financial loss, material distress or material inconvenience; and
(b)...
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